The Federal Reserve kept rates on hold at the final meeting of Jay Powell’s term as chair, as surging energy prices opened the biggest divide on the central bank’s board in more than 30 years.
“Inflation is elevated, in part reflecting the recent increase in global energy prices,” the rate-setting Federal Open Market Committee said in its post-meeting statement, as it voted to keep in place the benchmark federal funds rate in a 3.5-3.75 per cent range for the third meeting in a row.
Three regional Fed presidents said that while they backed the decision to keep rates on hold, they did not support a line in the statement that signals the US central bank has a bias towards lowering borrowing costs at future policy votes.
The three dissenters were the Cleveland Fed’s Beth Hammack, Minneapolis’ Neel Kashkari and Lorie Logan of the Dallas Fed.
Stephen Miran, a Fed governor and Trump ally, continued to support a quarter-point rate cut, marking the first time four officials have dissented since October 1992.
Wednesday’s meeting is set to be the last to be chaired by Jay Powell, after a Senate panel earlier on Wednesday approved the appointment of Kevin Warsh, Donald Trump’s nominee to lead the US central bank. The decision puts Warsh on track to be approved by the Republican-controlled Senate before Powell’s chair term expires in mid-May.
Powell said on Wednesday that he planned to remain a Fed governor “for a period of time” after Warsh succeeds him as chair. The move breaks with a long-standing precedent in which Fed chairs stand down as governor once their successor is appointed.
Powell, whose governor term runs to 2028, said that he would continue in that role until there is a resolution to the Department of Justice’s criminal probe over the central bank’s headquarters renovation.
The DoJ last week said it would drop the investigation, but Jeanine Pirro, the US attorney who is leading the probe, said she was prepared to reopen it pending a review by the Fed’s inspector general.
The meeting comes as policymakers are grappling with a fresh surge in oil prices, with international benchmark Brent rising above $119 per barrel earlier on Wednesday — the highest level since June 2022 — as the stand-off between the US and Iran over reopening the Strait of Hormuz continued.
The statement said that the situation in the Middle East was “contributing to a high level of uncertainty about the economic outlook”.
